Exam 14: Firms in Competitive Markets

For a firm, marginal revenue minus marginal cost is equal to

A miniature golf course is a good example of where fixed costs become relevant to the decision of when to open and when to close for the season.

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $10, what is the firm's total revenue?

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $145,000. Because of this information, in the short run, the Brookside Racquet Club should

Figure 14-7 -Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is $125 at

At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units. What is the firm's current profit? What is likely to occur in this market and why?

The analysis of competitive firms sheds light on the decisions that lie behind the

Scenario 14-5 A study sponsored by the Food Consumer Safety Board found that consumption of irradiated tomatoes increased the health of laboratory rats. As a result of national press coverage of the report, the demand for irradiated tomatoes increased dramatically. Organic farmers were able to switch from organic production of tomatoes to irradiated production with no additional cost. Assume that the tomato market satisfies all of the assumptions of perfect competition. -Refer to Scenario 14-5. If the increased production of irradiated tomatoes caused a rise in the marginal transportation costs of moving irradiated tomatoes to market, the

A firm will shut down in the short run if revenue is not sufficient to cover all of its fixed costs of production.

In a market with a fixed number of firms, as long as price is above average

In the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. This firm should continue to produce and sell units as long as the marginal cost of production is less than or equal to

The long-run supply curve for a competitive industry may be upward sloping if

When economic profits are zero in equilibrium, the firm's revenue must be sufficient to cover all opportunity costs.

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-2. This firm maximizes total revenue by producing

Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $5, and is earning $240 economic profit in the short run. What is the current market price?

The long-run market supply curve in a competitive market will

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

If there is an increase in market demand in a perfectly competitive market, then in the short run

For a firm operating in a perfectly competitive industry, marginal revenue and average revenue are equal.